Got a plan?

By Jessica Legge
Times West Virginian

FAIRMONT October 12, 2008 01:03 am

— “Retirement ... Got a Plan?”
Workers explored this topic during the recent West Virginia University Retirement Planning Conference 2008, which was held Oct. 7 at the Waterfront Place Hotel in Morgantown. The WVU Division of Human Resources sponsored the free event for university employees.
During the conference, WVU faculty and staff had the chance to browse retirement resource tables, attend various workshops, and gain insight from two keynote speakers.
Jean Setzfand, director of financial security for AARP, gave the first keynote address on “Taking a Look at the Big Picture.” She focused on financial security during her presentation.
In 1958, Ethel Percy Andrus founded AARP, a nonprofit nonpartisan membership organization for people 50 and older. AARP, which has more than 40 million members, looks at issues that impact aging people today. The AARP West Virginia State Office is located in Charleston.
“We need to have dignity as we age,” Setzfand said.
She said persons may have questions because of the current economic climate. Some people may be asking whether their savings are safe in the bank, about the effect of today’s economy on their retirement, and if they should postpone retirement.
Safeguards exist to protect financial assets, such as bank deposits, brokerage accounts and insurance products, Setzfand said. The economy has an impact on each aging person’s retirement accounts, business operations and consumer credit.
Given the conditions and climate of the economy today, people may want to consider waiting to retire depending on their situation, she said.
Setzfand advised individuals to continue with their retirement as planned if they are able to pay for basic living expenses with lifetime income, have individual savings to cover other emergency and life expenses, and have health care insurance. If persons can’t meet this criteria, then they should hold off on retirement until they can.
She provided some money tips for troubled times. Setzfand encouraged people to take their emotions out of investing. Persons may feel anxious and confused with the uncertainty in the markets, but using emotions as a basis for financial decisions isn’t smart.
She said individuals should make long-term investments, because their money needs to last long after their actual retirement.
“You do have to think about the future,” she said.
Setzfand also mentioned the rebound effect. She said the past can’t guarantee what will happen in the future, and people need to be informed investors to help alleviate worries over abrupt market moves. Individuals should think twice before acting — when buying or selling.
Setzfand then discussed the 10 steps to financial freedom that persons should consider when thinking about retirement and their options.
The first step is using credit wisely. Persons should strive to use credit
cards with low interest rates and pay off their balance each month. They should also obtain a free annual credit report and work to improve their credit score, she said.
“The one thing you don’t want to be burdened with is a lot of debt when you retire,” Setzfand said. “Try to get yourself in line (to avoid debt).”
People can achieve step two, which is protecting your identity, by monitoring any suspicious activity on credit reports and shredding important documents. The next step is knowing how much to save, which means persons should begin to think about their retirement lifestyle, Setzfand said.
In the fourth step, individuals need to remember that where they save matters, whether it’s a 401(k) plan through an employer and an Individual Retirement Account (IRA), she said.
“If you’re saving for retirement, take advantage of retirement accounts,” Setzfand said.
She said persons need to be aware of fees and expenses, which reduce returns over time for all types of financial products.
“With investments, it’s also important to know what you’re paying,” Setzfand said.
When making an investment, a consumer should investigate the product and the person selling it and report any incidence of fraud, she said.
Also, persons need to consider how much money is enough so that they don’t outlive their assets. Setzfand said people should estimate basic, fixed expenses and social security benefits and look at options for health insurance.
And when in doubt, people should ask financial professionals for help, she said. For more information, visit www.aarp.org.
Brett Hammond presented the second keynote address, which was titled “Focusing on Fundamentals: Asset Allocation in Volatile Markets.” Hammond, managing director and chief investment strategist for TIAA-CREF Individual & Institutional Services LLC, spoke about how the economy today affects retirement investments.
He said these are troubling times, and the country hasn’t had a credit situation like this since the depression. Hammond reassured the conference attendees that TIAA-CREF, a nonprofit financial services firm, is in a positive financial state.
“We have investment policy that is for the long run,” he said. “TIAA-CREF is quite solid and will continue to be.”
With graphs, Hammond showed the beating that the financial sector stock has taken and how national economic growth rates are declining.
“The risk is whether there’s going to be severe recession across the globe (or not),” he said.
Hammond pointed out that global inflation has ticked up, and leading indicators in developed economies are dropping. He said home prices have gone down about 16 percent in the last year, and new home construction has slowed in response.
He said the financial crisis has been in the making for years. It resulted from the deregulation and globalization of financial markets, rise of risk management, overflow of liquidity and borrowing, and increasing asset prices, particularly in housing.
“The structure of the economic system changed in finance,” Hammond said.
He said the financial crisis emerged as residential market troubles appeared and multiplied and credit markets came to a standstill. The economy began to crumble, the corporate profit picture remains gloomy, and there has been a major repricing of risk around the world.
“Another thing is perception,” Hammond said. “People begin to get worried.”
The financial crisis fix has involved mergers, bankruptcies and takeovers, he said. One solution is to reassemble mortgages from their structured securities parts, identify troubled mortgages, and provide aid to homeowners and solvency for mortgages.
The federal plan includes purchasing up to $700 billion in structured securities, modifying some home loans, and increasing oversight of investment banks, Hammond said.
He said the U.S. dollar has declined, stock markets are more volatile, and borrowing has taken a downturn.
During this credit crunch environment, Hammond advised investors to diversify across asset classes, sectors and national boundaries. Persons should never make bets that if unsuccessful would risk achievement of long-term investment goals.
They should avoid using market timing as a strategy because it’s difficult to do successfully, even for professionals. Market timing requires insights that are unknown in the market place, Hammond said.
However, persons can take advantage of market movements in respect to long-term trends, he said.
Hammond summarized by saying that the country is in uncharted waters in the financial system, and people need to think long-term. Diversifying can help, and consumers should find a trusted counsel. They also need to remember that it’s impossible to predict a day or month when things will go up or down.
E-mail Jessica Legge at jlegge@timeswv.com.

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